Context: The NITI Aayog recently released a report “S.A.F.E. Accommodation - Worker Housing for manufacturing growth” suggesting the Central Government to build mega housing projects near manufacturing plants where industrial workers could rent a room for as low as Rs 3000.
Relevance of the Topic: Mains: Welfare schemes for vulnerable sections of the population by the Centre and States. (S.A.F.E. Accommodations for Workers)
India’s Manufacturing Aspirations:
- India aims to increase the manufacturing sector’s contribution to GDP (from the current 17% to 25%) and become a global manufacturing hub, as part of its vision for ‘Viksit Bharat’ by 2047.
- As per the Economic Survey 2023-24, India needs to add 7.85 million jobs every year until 2030 to sustain economic growth. A productive workforce is central to attain the vision.
- India needs to create more jobs for women and increase Female Labour Force Participation Rate. In India, women contribute only 18% to the GDP. (In China, women’s contribution to GDP is around 41%)
Issues due to Inadequate Housing near Industrial hubs:
- High Attrition rates and Increased workforce instability
- Reduced Labour productivity
- Limits Labour mobility (restricts migration of workers)
- Poor Female Labour Force Participation Rate (FLFP)
Why S.A.F.E. Accommodation Matters?
- Enhance Workforce Productivity
- Lower commute time
- Affordable housing for workers
- Improves workers’ quality of life
- Enables labour mobility
- Win-Win-Win Scenario:
- S.A.F.E. accommodation for labour, Increases FLFP rate.
- Lower attrition rate, lower recruitment costs and stable workforce for Companies.
- Promotes planned Urban development.
- Ensures attractive returns on investment for Private developers.
- Promotes competitiveness of the Indian manufacturing sector & attracts global investment.
- Aligns with Global Labour Standards (E.g., ILO Labor Welfare Conventions)
Note:
- Factories Act, 1948: Mandates basic welfare amenities for workers which can be extended to housing. (As per the Act: Factories employing more than 150 workers must provide and maintain adequate and suitable shelters/restrooms, and lunchrooms for the use of workers)
- Social Security Code, 2020: Consolidates the laws relating to social security benefits including housing to all employees either in the organised, unorganised or any other sectors.
Challenges in Scaling Up Worker Accommodation:
- Restrictive Zoning Laws: Residential developments are often prohibited in industrial zones unless explicitly permitted.
- Restrictive Building Laws: Low Floor Area Ratios (FAR) and other inefficient land-use regulations limit the potential for high-capacity housing on available land.
- High Operating Costs: Hostel accommodations in industrial zones are often classified as commercial establishments, leading to higher property taxes and utility rates.
- Financial Viability: High capital costs and low returns make large-scale worker accommodation projects unattractive to private developers.
Proposed Solutions by NITI Ayog:
1. Regulatory Recommendations:
- Classification of S.A.F.E Accommodation: S.A.F.E accommodation should be classified as a distinct category of residential housing. This classification would ensure:
- GST Exemption for accommodations meeting specified criteria (E.g., ₹20,000 per person per month for a continuous stay of 90 days).
- Residential Rates: Application of residential property tax, electricity, and water tariffs to reduce operating costs.
- Long-term, dormitory-style affordable accommodations designed exclusively for industrial workers, located near their workplaces.
- Zoning Reforms: Allow ‘mixed land use’ in industrial zones or designate ‘SAFE accommodation as a permitted use in industrial zones’ to enable construction of working houses close to workplaces.
- Environment Clearance Exemption: Include S.A.F.E. accommodations under the exemptions provided for industrial sheds, schools, colleges, and hostels in the draft notification issued by the Ministry of Environment, Forest, and Climate Change (MoEF&CC).
2. Financial Recommendations:
- Provision of Viability Gap Funding (VGF):
- Provide up to 30-40% of the total project cost (excluding land) through VGF, with 20% contributed by the Department of Economic Affairs (DEA) and 10% by the sponsoring nodal ministry (MoHUA). Additionally, State Governments may provide a VGF up to 10%.
- Amend Annexure 3 of the VGF scheme to include affordable rental housing as an eligible sector.
- Retrofitting Existing Facilities: The VGF can also be leveraged to retrofit / upgrade existing brownfield workers’ accommodation facilities.
- Competitive Bidding: Determine VGF support through a transparent and competitive bidding process.
Conclusion: As India progresses towards becoming a $5 trillion economy, addressing workers accommodation challenges is a priority. By aligning the regulatory and financial frameworks, India can unlock the potential for sustainable worker housing solutions that would bolster the manufacturing ecosystem, enhance workforce productivity, and attract global investments.